Taxes 2014, mortgage

There are only a few tax cuts available for individuals in Estonia. The three most common being the tax cut you get for having a child under the age of 18, for having paid some sorts of school fees or the tax cut you get on interest paid on your home loan.

The usefulness of this tax cut

Essentially the mortgage tax cut means that the interest you pay towards your mortgage is tax free, meaning you get back 21% (2014 income tax rate) from the government. This is essentially seen as a way for the government to help citizens in getting their own homes. I’m somewhat ambivalent on this tax cut. While it is of course nice, then it’s not really what will make it or break it if you’re actually looking into buying a home.

This tax cut is the one most likely to disappear as well, there’s been quite a lot of discussions about its usefulness in the media recently and well, the government needs money! I’m not really going to miss this cut when it disappears since it’s been reduced once already to limit its usefulness. Numbers wise, taking into account the tax return the effective interest rate of my mortgage is <2%, which is nice, but it being over 2% wouldn’t hurt much either.

Currently the cap of interest that’s tax free is 1920€. For my mortgage the interest payments for the year 2014 were 1200€, so we’re not even taking advantage of the full scale of the cut. Overall it comes to about 240€ in returned money, and that essentially covers the income tax I’d have to pay for my investments with a bit left over that’s going straight back into investments.

2 thoughts on “Taxes 2014, mortgage

  1. Easy for me to say who doesn’t live in Estonia but I totally agree the mortage interest tax cut should be removed. Now when the interest rates are extremely low is the right time to do that as it would hurt relatively little. Also I agree that paying tax is not fun but running a society is not cheap and taxes are a good way of getting enough € to run the country.

    Over here we have mortage interest tax cuts and the result is a population of debt addicts 😮 . In theory the cuts should help people afford buying houses but I feel those cuts just have made it possible for people to borrow more for their houses. Thus making the houses and flats even more insanely expensive. On the other hand the population increases faster than new houses are built so the cost of houses would probably rise anyway. Especially in the big cities.

    Occasionally it’s argued over here that the tax cut should be eliminated but that would be very impopular among big parts of the population so no politician has dared to seriously propose that :(

  2. You’d have to have at least two underaged children to get the tax cut. Personally I’d add the supplementary pension (the third pillar) to list, too.

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